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Business Loans Without Collateral

Collateral-Free Business Loan

With the recent hit pandemic, many small businesses had to fight for survival. They couldn't rely on the lengthy, time-consuming approvals of traditional models of loan banking and required an instant solution to finance their working capital needs. This is where a collateral-free business loan comes into play.

Our government introduced many schemes for MSMEs and SMEs to give them the necessary financial assistance in these covid times. With the government and many banks introducing collateral-free loans, most small businesses took advantage of these and tapped into their benefits. Let's understand the meaning of a collateral-free MSME business loan.

What is a Collateral-Free Business Loan?

Collateral means security or an asset that a lender requires from the borrower as a guarantee before granting them the desired loan. Such security or asset is repossessed from the borrower after paying off the loan fully. However, on defaulting the repayment, the lender seizes this asset, and they have the right to sell it to cover his losses.

Small businesses or startups don't have many assets and can't afford the risk to put up the same for a loan. In these corona times, to help such businesses get a starting push and help them get back on track, a collateral-free business loan was introduced.

Collateral-free business loans are business loans that are free from any collateral funding requirements. Businesses can get desired funds promptly and focus on their growth. These may be term loans ranging from 1-10 years or short-term business loans for regular business activities like staff remuneration or inventory handling.


Collateral-free Business Loan Interest Rates

Types of Fees Applicable Charges
Interest Rate Starting from 1% per month
Loan Amount ₹50,000 to ₹1 Crore
Loan Tenure Up to 48 months
Collateral Not Required
Processing Fee 2% of the loan amount

Features of Collateral-Free Business Loans in India

A collateral-free small business loan is designed to give momentum and the desired thrust to small and medium-sized businesses. The flexible features of collateral-free business loans make them quite popular with the majority of these starting companies. Some of these features are:

  • Quick processing

Due to our fast disbursement procedure, your loan will be authorized within three business days with us. You may receive a loan of up to Rs. 10 crores without difficulty. We make every effort to expedite the loan's implementation and to guarantee that it is made available within the stipulated time frame.

  • Options for Repayment

There are currently a variety of repayment alternatives available for business loans. Lenders are often aware of the difficulties inherent in small business operations. They do, however, have a range of adjustable terms and conditions. They can allow for a variable EMI dependent on the company's financial position and also allow for bullet payments for recurring payments.

  • Credit Rating

FlexiLoans loans are an excellent way to improve your business's credit score, and we report loan activity to all three major credit bureaus. Additionally, a business loan from FlexiLoans is advantageous for businesses that have recently seen their credit score fall as a result of unforeseeable market conditions.

  • Minimum Required Documents

One of our primary advantages is that we accept loan applications with minimum paperwork. As a consequence, it would not be necessary to provide lengthy documentation to apply for a business loan with us. Additionally, because we provide company loans without needing equity, no asset or collateral documentation is required. Electronic uploading of business financing paperwork is feasible.


Benefits of Collateral-Free Business Loans

Our country thrives on small and medium businesses as the growth of these enterprises, in turn, gives a boost to the economic growth of the country. We have already discussed a major benefit, i.e., no security or guarantee of any sort, that needs to be pledged by the businesses while applying for the loan. Entrepreneurs with no assets also can apply for the loan. Let's discuss some other benefits of collateral-free business loan for small and medium-sized enterprises:

  • Reasonable interest rates

The SMEs and MSMEs not only get collateral-free financing for their business but can also avail such attractive interest rates for business loans. These subsidized interest rates make such loans more popular with the industries. Also, a good credit rating of the borrower can help in further reducing the interest rates on loans.

  • Faster approval of loan applications

Another advantage of a collateral-free business loan is that borrowers get the funding quickly and easily. There is no wastage of time in the valuation of assets or transferring security documents in the lender's name. The timely processing of applications by the credit rating agencies makes these loans a hassle-free option for the borrowers. With the FlexiLoans mobile app, interested borrowers can apply for a loan from their mobile phones only. Also, its online application does not take more than 10 minutes, and the borrower does not need to visit any branch during the whole loan approval process.

  • A multitude of loan options

With major renowned banks offering collateral-free options, borrowers can choose from various collateral-free business loans as per their suitability. They can even invest in government-introduced schemes specially designed for this purpose. A borrower can avail of a long-term loan or a short-term loan. Whether for inventory requirements or expansion of office space, or purchase of new machinery, collateral-free loans are available to fulfill different purposes.

  • Flexible repayment timelines

Apart from the reduced interest rates, borrowers also get a customized, flexible repayment option for up to 48 months. As your revenues grow, you may choose to return your loan sooner to achieve debt freedom sooner. Multiple repayment alternatives from FlexiLoans are tailored to your financial circumstance and may be beneficial in this circumstance.

  • End-use adaptability

The instant business loan contains no limits on how the funds may be used. You may use the cash to acquire new equipment, improve current infrastructure, recruit additional workers, or satisfy other technical needs.

  • Simple access to finances

Occasionally small businesses face an urgent need to inject cash into their businesses. With an online application that needs minimum documentation, you may expedite the acceptance of your collateral-free business loan. Online document submission expedites the verification procedure and expedites disbursement.


How to Apply for a Collateral-free Business Loan?

  • Online Application:

Log on to the FlexiLoans website and complete the application form by correctly filling in the relevant information. FlexiLoans will use these details to assess your eligibility for the collateral-free business loan.

  • Upload the required documents online:

Upload all necessary documents, such as KYC Documents, Current Account Bank Statements, and Business KYC Documents.

  • Credit Analysis:

We'll assess your business results and operations to calculate the amount of money you'll be eligible to borrow and the interest rates that will apply. Our loan officers will assist you in understanding the bid and making the right decision.

  • Loan Disbursement:

FlexiLoans will share the loan agreement after verifying the documentation and approving the loan. The funds are disbursed to the applicant's account within 48 hours of signing the document.


Business Loan Eligibility Criteria without Collateral

To ensure quicker loan approval, we kept the business loans guide short. Here is the paperwork you must provide to ensure that your application is reviewed as quickly as possible.

  • An individual must be 21 years of age when applying for the loan and not more than 65.
  • Collateral-free loans are available to individual corporations, sole proprietors, and private companies involved in trading, production, or services.
  • The applicant must have worked in the industry for three years and have at least five years of experience.
  • Offers Collateral-free loans to those businesses that have been running for at least a year and have monthly total sales of at least ₹2,00,000.
  • An applicant who has never defaulted on a loan with a financial institution.
  • A patron assurance from the Indian patent and trademark office is required.
  • The previous year's revenue should be fully audited by a CA.
  • Proof of residence and business location.
  • If the company has been in service for even more than 3 years, you can apply for a Collateral-free loan.
  • We would also ensure that there are no errors in previous accounts and, as such, the company is tax compliant.

Finally, verify that the paperwork is in order well in advance of applying for a loan, and hold it in digital format so that it could be submitted during the application process.


Documents Required for Collateral-Free Business Loan

  • Personal KYC: PAN card
  • Residential Address Proof (Anyone): Rent agreement, driver’s license, Voter’s ID, Ration card, Aadhaar Card, Passport
  • Banking: Last six months’ current account bank statement
  • Business KYC (Anyone): GST registration certificate, shops and establishment certificate
  • Financial documents (For loans greater than 20 Lakhs): 2 years’ Audited financials, Last 2 years ITR, GST Returns of 6 months

MUDRA Yojana

It is an Indian government program for small and medium-sized businesses. MUDRA Yojana is available to non-farming and non-corporate SMEs under PMMY. Small businesses can apply for loans up to Rs. 10 lakhs under the plan. It was launched on April 8, 2015.

Businesses that obtain a PM MUDRA loan are not required to provide security or collateral to secure the loan amount. Additionally, there are also no processing fees. Borrowers can obtain a MUDRA loan up to a maximum of Rs. 10 lakhs. Even borrowers can check Mudra loan interest rate for a better understanding of rates & charges.

Borrowers may apply online for a MUDRA loan in one of three categories:

  • Shishu Loan:

Businesses can apply for a credit of up to Rs. 50,000 under this program. It is designed for small businesses that are either just starting or wish to start one.

  • Kishor Loan:

A business owner can apply for a business loan of up to Rs. 5 lakhs under this plan. It is designed for borrowers seeking additional funding to grow their business operations.

  • Tarun Loan:

It is the third form of loan available under the Pradhan Mantri MUDRA lending arrangement. The applicant can obtain a loan of up to Rs. 10 lakhs for his firm under this program.

Frequently asked questions

What are the purposes for which I can get a loan via FlexiLoans?

FlexiLoans is here to provide you financial access for your business funding needs. You have to undergo simple and transparent Credit Evaluation, basic documentation before we disburse the loan. You may get loans via FlexiLoans for:
  • Expanding your business
  • Servicing regular working capital needs
  • Managing seasonal working capital requirements
  • Manage short term cash flow gaps

Why should I avail a Collateral Free loan via FlexiLoans?

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

What documents are required to apply for a collateral free business loan?

KYC document

  • - Pan card

Proof of residential address (any one)

  • - Rent Agreement
  • - Driving License
  • - Voter's ID
  • - Ration Card
  • - Passport

Banking

  • - Last 6 months of bank statement of current account

Business KYC (any one)

  • - GST Registration Certificate
  • - Shop Establishment Certificate

Financial documents (For loans greater than 20 Lakhs)

  • - 2 years Audited financials
  • - Last 2yrs ITR
  • - GST Returns of 6 months

Are there any charges other than interest rate that I have to pay to avail the loan?

We may charge processing fee to facilitate the loan towards legal and documentation charges. You may be charged penal charges for late or irregular payment behavior.

Can I get a business loan without collateral?

Yes, FlexiLoans provide a collateral free business loan.

How is the interest rate calculated on a collateral free business loan?

  • Business Loan interest rate is calculated basis- E = P * r * (1+r)^n / ((1+r)^n-1).
  • Here, P signifies principal loan amount, r signifies the interest rate, n stands for tenor in months and E signifies the EMI amount.
  • You can use the FlexiLoans EMI Calculator to check the interest payable, EMI amount and more.

Who is eligible to apply for a collateral-free business loan?

  • Age limit: A major condition for loan eligibility is that the applicant must be between the ages of 21 and 65. Many individuals who fall into or are excluded from this group are ineligible to qualify for a loan.
  • Tax records: Having well-managed tax paperwork expedites and streamlines the loan approval process; candidates are required to provide at least one year's worth of tax returns.
  • Profitability of the Business: Candidates must show a business strategy that projects an annual profit of at least 10 lakhs.

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

We may charge processing fee to facilitate the loan towards legal and documentation charges.

Interest rates start at as low as 1% per month. However, it may depend on various factors like your loan amount, tenure, eligibility, etc.

  • Age limit: A major condition for loan eligibility is that the applicant must be between the ages of 21 and 65. Many individuals who fall into or are excluded from this group are ineligible to qualify for a loan.
  • Tax records: Having well-managed tax paperwork expedites and streamlines the loan approval process; candidates are required to provide at least one year's worth of tax returns.
  • Profitability of the Business: Candidates must show a business strategy that projects an annual profit of at least 10 lakhs.

Yes, FlexiLoans provide a collateral free business loan.

  • Business Loan interest rate is calculated basis- E = P * r * (1+r)^n / ((1+r)^n-1).
  • Here, P signifies principal loan amount, r signifies the interest rate, n stands for tenor in months and E signifies the EMI amount.
  • You can use the FlexiLoans EMI Calculator to check the interest payable, EMI amount, and more.

KYC document

  • - Pan card

Proof of residential address (any one)

  • - Rent Agreement
  • - Driving License
  • - Voter's ID
  • - Ration Card
  • - Passport

Banking

  • - Last 6 months of bank statement of current account

Business KYC (any one)

  • - GST Registration Certificate
  • - Shop Establishment Certificate

Financial documents (For loans greater than 20 Lakhs)

  • - 2 years Audited financials
  • - Last 2yrs ITR
  • - GST Returns of 6 months